Construction Outlook: Supply issues add pressure to an already difficult time of year

March 15, 2022

Our latest data indicates that risk has grown across construction-related sectors

Our regular data series, which we provide to the New Zealand Hardware Journal, assesses the level of credit risk posed by the four business sectors most closely associated with the Construction & Hardware industry:

  • Residential Construction
  • Commercial Construction
  • Hardware, Building & Garden Supplies Retailing
  • Core Retailing


Below is the New Zealand Hardware Journal’s commentary:

Our last update, reporting on October-December (posted 20 January), showed slight end-of-year risk increases for the Residential and Commercial Construction sectors.

Now, armed with January 2022 data, we can clearly see a noticeable risk increase across all four sectors, particularly in the 5-10% likelihood of failure risk bands (see graphs below).

CreditWorks’ Alan Johnston comments: “As earlier identified, we are in the middle of the toughest period of the year where debt becomes harder to recover.

“Aligned with the obvious problems of Christmas, and meeting tax, the building industry in particular is suffering with supply issues, as is well known, and this is slowing up construction in many cases, and in turn progress payments.

“Without product, the build can’t be progressed, the progress payment can’t be made, and the supplier can’t get paid.”

Looking forward now, says Alan: “February is already showing signs of stress, and we have seen several well-publicised business failures this month, as is usual for February – remember, this is the toughest collection month, and the month where traditionally there are the most company liquidations.

“So I expect to see further deterioration,  represented by higher risk levels, in next month’s figures.”

 


Now see the charts below for a visual explanation of the last three months’ risk profiles across our four chosen sectors.

The left axis indicates the % of a sector that is at risk. The bottom axis shows the % likelihood of failure over the next 18 months.

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